This Article is written by Shreya Singhal of 2nd Semester of Rajiv Gandhi National University of Law, Punjab, Intern under Legal Vidhiya
Abstract
A contract is a legally binding agreement between two or more parties that sets out the terms and conditions of a transaction or relationship. It is a voluntary exchange of promises or obligations that creates legal rights and obligations between the parties involved. Contracts can be written or oral, but written contracts are generally preferred because they provide a clear record of the agreement and can be used as evidence in case of disputes. A typical contract includes several key elements, including an offer, acceptance, consideration, and mutual intent to enter into an agreement.
An offer is a proposal made by one party to another, indicating the willingness to enter into an agreement. Acceptance occurs when the other party agrees to the terms of the offer, creating a mutual agreement. Consideration is the exchange of something of value between the parties, such as money or services, that forms the basis of the agreement. Mutual intent means that both parties must have a clear understanding of the terms of the agreement and the consequences of non-compliance. Contracts are used in a variety of contexts, including employment, real estate transactions, business deals, and consumer transactions. They serve as a means of establishing legal rights and obligations between parties and provide a framework for resolving disputes that may arise in the course of a relationship or transaction.
Key Words: Free Consent, Coercion, Undue Influence, Contracts
Introduction
Contracts are a part and parcel of our daily lives. Even without recognizing it, we keep on entering into contracts very frequently. But contracts have a far deeper meaning than what we think as a lay man. Under the Indian Contract Act, 1872, free consent, undue influence, and coercion are important concepts that relate to the validity of a contract.
- Free consent: Section 14 of the Indian Contract Act states that for a contract to be valid, the consent of the parties must be free. Free consent means that the parties to the contract must have agreed to the terms of the contract without any coercion, undue influence, fraud, misrepresentation, or mistake. If the consent is obtained by any of these means, the contract is considered to be voidable at the option of the party whose consent was not free.
- Undue influence: Section 16 of the Indian Contract Act defines undue influence as any kind of influence that is used by one party to dominate the will of the other party and force them to enter into a contract. It occurs when one party is in a position of power or authority over the other, and uses that position to obtain an unfair advantage. If undue influence is proven, the contract is considered voidable at the option of the party who was influenced.
- Coercion: Section 15 of the Indian Contract Act defines coercion as the use of force or threat to make a person enter into a contract against their will. Coercion makes the contract voidable at the option of the party whose consent was obtained by coercion.
In India, these concepts are used to ensure that contracts are entered into freely and fairly, without any exploitation or coercion. If any party is found to have used undue influence or coercion to obtain consent, or if the consent was not free, the contract is considered to be voidable and can be set aside by the affected party.
Free Consent
Free consent refers to a voluntary agreement between two or more parties to enter into a contract or any other legal obligation without any coercion, undue influence, fraud, misrepresentation, or mistake. In other words, free consent means that both parties have freely and knowingly agreed to the terms of the contract or agreement without any external pressures or deceit.
Free consent is an essential element of a valid contract, and if it is found that consent was not given freely, the contract can be declared voidable or unenforceable. The law protects individuals from being coerced or misled into agreements that they would not have made if they had been fully aware of the terms and consequences. To ensure free consent, it is important that both parties are fully informed about the terms and implications of the agreement, and that there is no abuse of power or authority that could influence the decision-making process. If there is any doubt about the validity of the consent, it is up to the courts to determine whether or not it was freely given.
In the case of Kedar Nath v. Gorie Mohammad,[1] the plaintiff had agreed to sell his property to the defendant. However, the agreement was made under duress, and the plaintiff was found to have not given his free consent. The court declared the agreement void.
Coercion
Coercion refers to the use of force, threats, or intimidation to compel someone to do something against their will. In the legal context, coercion refers to the use of unlawful pressure or influence to induce someone to act in a certain way, often in violation of their rights or interests. Examples of coercion may include physical force or violence, blackmail, extortion, psychological pressure, or the abuse of authority or power. Coercion can occur in a variety of contexts, including in relationships, the workplace, or in criminal activities.
Coercion is often used as a tool for control and manipulation, and it can have severe negative consequences for the individual who is being coerced, including psychological harm, loss of autonomy, and violation of their fundamental rights. Coercion is generally considered illegal and unethical, and can result in legal consequences for the person who engages in such behaviour.
In the landmark case of Kedar Nath v. Gorie Mohammad (1915),[2] the plaintiff had taken a loan from the defendant bank and had mortgaged his property as security. The plaintiff argued that the loan agreement was void as he had been coerced into signing it. The court found that the plaintiff had indeed been coerced and declared the contract void.
Undue Influence
Undue influence is a legal term that refers to a situation where one person takes advantage of a position of power or trust over another person to influence that person’s decisions or actions in a way that benefits the influencer. The undue influence can be exerted intentionally or unintentionally, and the person being influenced may not even be aware that their decisions or actions are being influenced.
Undue influence can occur in a variety of contexts, including in personal relationships, business transactions, and legal proceedings. The person who is being unduly influenced may be vulnerable, such as an elderly person, a person with a disability, or someone who is emotionally or psychologically dependent on the influencer. Undue influence is different from coercion in that it does not necessarily involve physical force or threats. Instead, it is a form of manipulation or exploitation that takes advantage of the vulnerable person’s trust or dependency. If undue influence is found to have occurred in a legal context, any resulting agreement or contract may be declared voidable, and legal action may be taken against the person who exerted the undue influence.
In the landmark case of Mohori Bibee v. Dharmodas Ghose (1903),[3] the plaintiff had taken a loan from the defendant and had mortgaged his property as security. The plaintiff was a minor at the time and was found to have been subjected to undue influence by the defendant. The court declared the contract void.
Difference between Coercion, Undue Influence and Free Consent
Coercion, undue influence, and free consent are all related to the concept of consent in contract law, but they are distinct concepts with different implications.
Coercion occurs when one party compels another party to enter into a contract by using threats or force. This could involve physical violence, the threat of harm, or even economic pressure. Coercion is typically considered an unlawful means of obtaining consent, and contracts that are entered into under coercion are generally voidable.
Undue influence, on the other hand, occurs when one party takes advantage of their position of power or trust to influence another party’s decision-making. For example, a doctor who convinces a patient to enter into a contract to purchase medical services that they do not actually need could be said to have exerted undue influence. Like coercion, undue influence can also render a contract voidable.
Free consent, meanwhile, is the voluntary and uncoerced agreement of both parties to enter into a contract. It is a fundamental requirement of a valid contract. When a party gives their free consent to a contract, they do so without any coercion or undue influence. This means that they enter into the contract of their own free will, without any threats or undue pressure.
In summary, coercion and undue influence are both factors that can affect the validity of a contract, whereas free consent is a necessary requirement for a contract to be considered valid.
Conclusion
Contracts that are vitiated by coercion, undue influence, and fraud are considered voidable contracts. This means that they are initially valid contracts but can be set aside by the affected party if they can prove that one of these factors was present at the time the contract was entered into.
Coercion occurs when one party forces the other party to enter into a contract through the use of threats or force. Undue influence occurs when one party takes advantage of the other party’s weakness or dependence to persuade them to enter into a contract. Fraud occurs when one party intentionally deceives the other party to induce them to enter into a contract. If a contract is found to be vitiated by one of these factors, it is considered voidable, which means that the affected party can choose to either continue with the contract or rescind it. If the affected party chooses to rescind the contract, it is treated as if it never existed, and the parties are restored to their pre-contractual positions.
However, if the contract is found to be vitiated by both coercion and undue influence, or both fraud and undue influence, then it is considered void ab initio, which means that it is treated as if it never existed from the very beginning. In such cases, the parties are restored to their pre-contractual positions, and any benefits that have been received under the contract must be returned.
[1] Kedar Nath v. Gorie Mohammad, (1883) ILR 9 Cal 683.
[2] Kedar Nath v. Gorie Mohammad, (1883) ILR 9 Cal 683.
[3] Mohori Bibee v. Dharmodas Ghose, (1903) 30 Cal. 539.
